Mercy Regional moves to correct budget shortfall

Officials at Mercy Regional Health Center announced Tuesday a series of measures they hope will stabilize their fiscal situation in the face of declining in-patient activity.

The steps are being taken as part of a system-wide adjustment by Via Christi Health, Mercy’s parent operation, designed to cope with drops in hospital and physician visit volumes.

“These declines have been taking place over several years but they have accelerated at Via Christi since the snow storms in February and have not bounced back,” said Jeff Korsmo, president and CEO for Via Christi Health.

Korsmo said the Via Christi system is approximately $18 million below budget for the current fiscal year, which ends June 30. That puts its system-wide 2013 operating margin at 0.1 percent, a fraction of the 3 percent to 4 percent operating margin viewed as necessary to maintain viability.

“After three consecutive months of volume shortfalls, we believe we must assume that our volumes will not bounce back in the short term,” he said. “Consequently, we must act now if we are to achieve the modest 1.5 percent operating margin budgeted for 2014.”

He said the planned actions include a reduction in the size of staff to align with what appears to be the “new normal” for hospital and physician visit volumes. Initial estimates are that the reduction will be in the range of 350-400 positions, or about 4 percent of Via Christi’s statewide workforce. Additionally, senior leaders will be taking a salary reduction of about 4 percent.

John Broberg, senior administrator of Mercy Regional in Manhattan, said proactive steps taken to this point provide hope that current local staffers’ positions may not have to be terminated. But he acknowledged that remained a possibility, and said they have identified 10 presently vacant positions that will not be re-filled.

The current budget shortfall at Merry Regional is $1.6 million.

“We are currently working with our leadership team to develop a plan to address this shortfall by reducing $1.6 million in salary and benefit expenses to ensure our success in the future,” said Broberg.

He said the decline in in-patient activity may reflect increased competition from Topeka, or it may reflect a change in health patterns and requirements, with shifts toward out-patient services.